New-look stores got company on track

January 08, 2008|By The Wall Street Journal

McDonald's move into upscale coffees dates back to a concept that is unfamiliar to most of its customers: the McCafe.

It started in Australia in 1993. McDonald's brought the cafes to the U.S. in 2001 by carving out a corner of the restaurant, decorating it with leather couches and adding a counter that sold cappuccinos and sweets. But the cafes never took off in the U.S. because they didn't feed into McDonald's drive-through business, where two-thirds of sales take place, says Don Thompson, president of the chain's U.S. business.

In 2003, McDonald's initiated a turnaround strategy called Plan to Win. Among other things, it included a total remodeling at thousands of U.S. locations. Molded plastic booths were replaced with oversize chairs, lighting was softened and muted tones took the place of bright colors.

"We began to realize ... we could definitely sell coffee in this environment," Thompson said. In 2006, McDonald's changed its drip coffee to a stronger blend and began marketing it as a "premium" roast.

In recent years, Starbucks started to see fast-food chains as more of a threat, according to former employees and people close to the company.

Starbucks increased the pace of its store expansion at the beginning of this decade. Some changes, including drive-through windows and breakfast sandwiches similar to the Egg McMuffin, mirrored techniques used by fast-food chains. This led to tensions among management and employees about whether the chain was eroding the core of the Starbucks experience, according to former employees.

Some workers say their managers instruct them to ask customers whether they want a breakfast sandwich with their coffee -- a selling technique that feels unnatural.

"The more and more business they get in the store, the more it seems like another fast-food job," says Joe Tessone, a Chicago barista who has worked at Starbucks for three years.